U.S. Savings Bonds Primer

What is a U.S. Savings Bond?

U.S. Savings Bonds are obligations that the U.S. Government has issued. They can be purchased or redeemed only from an agent that has been authorized by the U.S. Treasury. A U.S. Savings Bond is a registered security, meaning that if your name is on the bond, you own that bond.

Do I Pay Taxes on Interest from U.S. Savings Bonds?

These bonds pay interest that is tax exempt at the state and local level. Federal income tax may also be deferred if you delay cashing the bond until its maturity date.

Why Invest in U.S. Savings Bonds?

These bonds are considered a safe and low (or no) risk investment. The obligation (or debt) you are buying is backed by the reputation and creditworthiness of the U.S. Government. U.S. Savings Bonds will pay back their principal, plus interest, regardless of fluctuations in the financial markets.

How Much Do You Need to Invest to Get Started?

An initial investment of $25 will get you a bond. In some cases (for example, an employee payroll deduction plan that allows you to invest in U.S. Savings Bonds) you may be able to start with an even smaller investment.

What are the Different Types of Savings Bonds?

More on this topic

The Series EE Savings Bond: This is the standard U.S. Savings Bond, and replaces the E Bond of the past. For EE Bonds purchased between May 1997 and April 30, 2005, interest is variable and based on a market rate of return. Series EE Bonds purchased on or after May 1, 2005 earn a fixed interest rate and interest compounds semi-annually for up to 30 years.
The Series I Savings Bond: The I Bond earns interest while protecting you against inflation. Interest is paid at a fixed rate and a variable semiannual inflation rate. Interest compounds semi-annually for up to 30 years.

What is the Annual Amount That Can Be Invested in a U.S. Savings Bond?

The U.S. Government has an annual limit for purchasing bonds. In December 2007, the U.S. Government set the limit at $5,000 for Series EE bonds and an additional $5000 per year for Series I savings bonds. This limit applies separately for paper bonds and electronic bonds, so you could purchase up to $20,000 worth of both types of bonds. This was done to give smaller investors additional opportunities to invest in U.S. Savings Bonds. Check U.S. Treasury Direct at www.savingsbonds.gov for the latest information on annual investment limits.

What is the Difference between Paper Bonds and Electronic Bonds?

U.S. Savings Bonds can be purchased as paper bonds or electronic bonds. Paper bonds are purchased from financial institutions and come in preset denominations. The Series EE Bond can be purchased as a paper bond, at half of its face value. For example, you will pay $25 for a $50 bond. EE paper bonds can be purchased in denominations of $50, $75, $100, $200, $500, $1,000, and $5,000, and $10,000. The Series EE Bond can be purchased electronically at face value. For example, you pay $50 for a $50 bond. Electronic EE purchases are made in $25 amounts or greater, to the penny. The Series I Bond can be purchased as a paper bond, at face value, in denominations of $50, $75, $100, $200, $500, $1,000, and $5,000. The Series I Bond can be purchased electronically for $25 or more, to the penny.

When Can I Redeem U.S. Savings Bonds?

Both EE and I Bonds can be redeemed after one year from the date of purchase. Series EE and Series I bonds that are redeemed within five years of purchase will forfeit the three most recent months of interest.

How Do I Purchase, Redeem, or Convert U.S. Savings Bonds?

Purchase U.S. Savings Bonds at any financial institution, through payroll deduction (if available through your employer), or online at Treasury Direct (www.savingsbonds.gov) by setting up an online account.Redeem your electronic bonds online at Treasury Direct. Redeem paper bonds at a financial institution, but call ahead to get details about any documentation required for this process. Convert your paper bonds to electronic bonds at Treasury Direct.

Who Can Own U.S. Savings Bonds?

You can own a U.S. Savings Bond if you have a social security number and meet one of the following classifications:

U.S. Resident
U.S. Citizen living abroad (with U.S. address of record)
U.S. Civilian employee
A Minor

Where Can I Learn More about U.S. Savings Bonds?

·         Treasury Direct, The Government Web Site with information on Savings Bonds, and online purchasing, redemption, and conversion of Savings Bonds: www.savingsbonds.gov
·         Treasury Direct’s I Savings Bonds in Depth: http://www.savingsbonds.gov/indiv/research/indepth/ibonds/res_ibonds.htm
·         Treasury Direct’s EE Savings Bonds in Depth: http://www.savingsbonds.gov/indiv/research/indepth/ebonds/res_e_bonds.htm

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